In the United States, it usually isn’t hard to find a phone: there are 286 million mobile handsets and 141 million landlines in service — 137 phones for every 100 Americans. Nonetheless, Congress sees fit to tax users close to $9 billion annually to provide access to those who might otherwise go without. The current goal of this Universal Service Fund: to subsidize telecommunications access for all low-income Americans, along with those who live in rural areas.
But telecom technology marches (sprints?) on, and with it the notion of what constitutes must-have service. Which is why the Federal Communications Commission is planning to steer some of the cash to high-speed Internet service. Here’s a more radical thought: Open the policy debate to the broader question of whether telecom subsidies are merited in the first place.
Our educated guess is that the benefits from USF outlays for plain old phone service are far less than the cost. Indeed, we expect that the case for subsidizing broadband is also weak, in part because over 90 percent of Americans already have access to broadband, and the number is growing rapidly without cash from a government slush fund.
OK, we didn’t just fall off the turnip truck. We understand that subsidies – especially subsidies funded from a tax that is collected in nickels and dimes – are hard to reverse. But if Congress can’t bear to let rural Americans pay the full cost of living in the country and won’t alleviate poverty directly, the least it could do is deliver the pork efficiently. That means targeting the subsidies more precisely and use competitive bidding to get the job done as cheaply as possible.